* Euro hovers near six-week lows
* Dollar/yen stabilise after sharp dip offers fresh buying
* Potential inconclusive Italy election refuels debt crisis
By Chikako Mogi
TOKYO, Feb 26 Asian shares will likely take
their lead from overnight plunges in global equities while
currency markets remain jittery on Tuesday as the uncertainty
over Italy's election results fuels fears of a resurgent euro
zone debt crisis.
With more than two-thirds of the vote counted, Italy's
centre left said in a statement on Monday it had won the lower
house and gathered more votes than its centre-right rival in the
The Senate result remains unclear, but projections indicate
no party or coalition won a majority of seats, which a
government would need to pass legislation.
An inconclusive election outcome would leave a split
parliament in the euro zone's third-largest economy, paralysing
a new government and potentially reigniting the euro-zone debt
The news hit as market sentiment had been improving on
receding tail risks over the euro zone debt crisis.
"Uncertainty over the Italian election outcome and its
impact will certainty keep the euro under strong pressure for
some time," said Yuji Saito, director of foreign exchange at
Credit Agricole in Tokyo.
"A safety net has been provided over the past year in the
euro zone and given the size of Italy's economy, I doubt that
the situation will turn into a disaster, but we need to
carefully monitor developments. It revives memories of risks in
the euro zone," Saito added.
The focus will now be on an Italian treasury bill auction on
Tuesday when borrowing costs could rise given the uncertainty
over the election result, he said.
The euro was trading at $1.3058, hovering near a
more than six-week low against the dollar of $1.3047 touched on
Monday on jitters about political gridlock in Italy hampering
the country's efforts to reform and slash its debts.
The yen at one point on Monday soared over 3 percent against
the euro and 2 percent against the dollar. The yen's recent
steep losses on bets of aggressive reflationary monetary policy
in Japan have made it vulnerable to sharp reversals.
On Monday the yen rose to a three-week high of 90.85 yen
from its intraday low of 94.77 touched earlier in the
day, its lowest since May 2010. The yen also surged to 118.74
against the euro from its day's low of of 125.36.
The yen was trading at 92.13 early on Tuesday against the
dollar and at 120.32 against the euro.
Traders said the plunge in the dollar and the euro against
the Japanese currency has provided fresh opportunities to buy
these currencies against the yen, with many market players still
seeing a weak yen trend continuing.
Credit Agricole's Saito expected markets to be volatile this
session, with testimony later in the day from Federal Reserve
Chairman Ben Bernanke. Investors will be seeking further clues
of when the Fed intends to slow or stop buying bonds.
Financial markets were rattled last week by minutes of the
Fed's January meeting showing some Fed officials were mulling
scaling back its strong monetary stimulus earlier than expected.
U.S. benchmark Standard & Poor's 500 Index suffered
its worst one-day percentage decline since Nov. 7 on Monday.
U.S. Treasury debt prices rose and benchmark yields dipped
to the lowest level in a month on Monday on the uncertainty over
whether Italy would be able to form a stable government.
Safe-haven buying pushed gold about 1 percent higher